The government of Mongolia, Turquoise Hill Resources, and Rio Tinto signed an Oyu Tolgoi Underground Mine Development and Financing Plan on May 18, reactivating a project that had been stalled since August 2013. Oyu Tolgoi is owned 66% by Turquoise Hill Resources and 34% by the government of Mongolia. Rio Tinto owns a 51% share of Turquoise Hill Resources and manages the project. Until the May 18 agreement, unresolved issues between the government and the companies had blocked progress toward underground development.
Oyu Tolgoi came into production as an open-pit, copper-gold-silver mine in early 2013. The operation shipped its 1 millionth metric ton (mt) of copper concentrate in March. However, 80% of the project’s value is in its underground reserves, and its long-term success depends on development of those reserves.
Turquoise Hill Resources completed a feasibility study for development of an underground block cave mine at Oyu Tolgoi in September 2014, based on 1.5 billion mt of mineral reserves grading 0.85% copper, 0.32 g/mt gold, and 1.94 g/mt silver. Recoverable metal would total 24.9 billion lb of copper, 11.9 million oz of gold, and 78 million oz of silver over a 41-year mine life.
Mine production would average 95,000 mt/d. Capital investment requirements were estimated at $4.9 billion.
While the May 18 agreement represents a key step toward renewal of underground development at Oyu Tolgoi, three additional hurdles remain to be cleared: approval of the underground feasibility study by Oyu Tolgoi shareholders; agreement on a comprehensive funding plan, including project finance; and receipt of all necessary permits.
Commenting on the importance of the May 18 agreement, Mongolia’s Prime Minister Chimediin Saikhanbileg said, “Mongolia is back to business. Oyu Tolgoi is a world-class copper-gold asset, and its further development is of great economic significance for Mongolia. We have finalized a way forward with our partners that re-establishes the foundations of a new and constructive relationship based on mutual trust and our joint long-term commitment to Mongolia’s growth.”